What is Tested On Crowd Funding

Crowdfunding has become a popular way for issuers to raise capital from small investors. Issuers may offer securities to investors for purchase through a broker dealer or through a registered crowdfunding portal. The portal must be registered with the SEC and must also be a FINRA member firm. Issuers who raise capital through crowdfunding may not engage directly in crowdfunding as a way to sell shares to investors. Issuers who sell shares through crowdfunding must register the securities with the SEC by filing form C. Because most of the securities are speculative in nature, broker dealers and crowdfunding portals must offer educational material to investors who are considering purchasing securities offered through crowdfunding. The material must detail the risks involved in making investments in companies through the crowdfunding process as well as the fact that the securities have a limited amount of liquidity. Investors who purchase shares through crowdfunding may not sell the shares for 12 months. Shares however may be transferred earlier to a relative or to a trust controlled by the investor or as a result of death or divorce. Early transfer will also be allowed if the purchaser is an accredited investor or if the securities are part of an SEC registered offering. Investors who purchase shares are limited to the amount of securities they may purchase through the crowdfunding process in any 12 month period. Investors who have annual income or a net worth of less than $100,000 are limited to purchasing the greater of $2,000 worth of securities or 5 percent of their annual income or net worth. If the investor uses the 5 percent calculation to determine their purchase limit the amount the person may purchase will be the lesser of the two amounts. Investors who have an annual income or a net worth greater than $100,000 may invest the lesser of 10 percent of their annual income or net worth up to a maximum of $100,000

good luck on your series 24 exam

Preparing for an Exam?

Receive 15% off all your Securities Exam Prep materials

Please wait....